THE ECONOMICS OF FTC v. LUNDBECK: WHY DRUG MERGERS MAY NOT RAISE PRICES

Gregory J. Werden

Journal of Competition Law and Economics, 2013, vol. 9, issue 1, 89-95

Abstract: In Federal Trade Commission v. Lundbeck, the courts rejected a challenge to a consummated acquisition that had placed under common control the only two drugs for treating a serious heart condition in newborns. Clinical studies showed that the two drugs were equally effective, and the only alternative, surgery, was not a good substitute. Moreover, prices shot up immediately after the acquisition. Yet the courts ruled that the FTC failed to demonstrate substitutability in response to a price difference between the drugs. This article explains why the much-criticized result and rationale of the case plausibly were correct. Analysis of a bespoke model of competition between therapeutic substitute drugs reveals that: (1) competition plausibly results in monopoly pricing, and if not, (2) competition plausibly results in near-monopoly pricing.

JEL-codes: D43 K21 L13 L41 (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/joclec/nhs033 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:jcomle:v:9:y:2013:i:1:p:89-95.

Access Statistics for this article

Journal of Competition Law and Economics is currently edited by Nicholas Economides, Amelia Fletcher, Michal Gal, Damien Geradin, Ioannis Lianos and Tommaso Valletti

More articles in Journal of Competition Law and Economics from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ().